UK’s ‘Google tax’ aims to undo ‘contrived arrangements’

Arrival of tax might spur governments and big business to implement recommendations of OECD’s Beps project, due to conclude next year

UK Public Accounts Committee chairman Margaret Hodge. Photograph: PA

The high profile of the multinational tax debate continued this week, with PwC's grilling by Margaret Hodge (above) in Westminster, Facebook Ireland Ltd reporting tax of €2.3 million on turnover of €2.9 billion, and then a batch of Luxleaks documents prompting fresh consideration of the past career of European Commission president Jean-Claude Juncker.

But the most significant development is the UK’s solo run with its so-called Google tax, details of which were released on Wednesday by the UK treasury. The new tax is aimed at undoing the advantages of “contrived arrangements”, but if there’s one thing that’s clear after years of controversy over aggressive multinational tax planning, it is that the global structures established by major corporates are awash with what the public, correctly, consider to be contrived arrangements. It is clear, too, that the UK will assess these arrangements in relation to their effect on the national treasury. The risks in such a drift are obvious.

Australia is thought to be planning an initiative similar to London’s. But such moves contradict what governments have said until recently, that the problem can only be addressed by way of internationally agreed rules. Hence the OECD’s base erosion and profit shifting (Beps) project.

The prospect of a host of nations all coming up with their own views on what constitutes contrived arrangements, so they can each slice a bit of tax from the global companies within their borders, is not a pretty one when viewed from corporate boardrooms.


Politicians and big business now have an obvious interest in bedding down the outcome of Beps, scheduled to conclude next year. The implementation of the Beps recommendations has been considered the hard bit of the project. Maybe a few “Google taxes” will spur things on.